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Facebook’s IPO

Author: bdrlondon

Published: 29th February 2012 10:56

Facebook is coming full circle. From its legendary roots of a night of boredom and brilliance at a Harvard dorm room to its current state of being a global phenomenon that is rapidly changing social media and online interaction, Facebook is once again bracing itself for the possibility of a big change.

Under the helm of its very private and unassuming chief executive, Facebook has been fiercely resistant about going public for a long time. In many ways, Mark Zuckerberg and his team have sheltered Facebook from the shark-infested waters of public trading, cradling the social media company in the private confines of its Palo Alto headquarters.

However, recent reports indicate that perhaps the Facebook CEO's icy outlook towards public trading is now thawing. Sources have said that Zuckerberg is now considering the idea of making Facebook public, with its members internally discussing the proper timing for filings with the United States Securities and Exchange Commission (SEC).

Record breaker

An initial public offering (IPO) is often explored once a company hits the $100 million mark. Clearly, Facebook has long surpassed that ceiling, as the company is expected to declare a $4 billion dollar revenue once it goes public. This makes Facebook one of the biggest, if not the biggest, social networking site to be traded publicly. Facebook's target IPO of $10 billion will be a record-breaking feat in the field of information technology - it will be the largest IPO ever recorded from an information technology company.

This public offering from the social network trumps Internet IPOs even from big Web sites such as LinkedIn and Google. On LinkedIn's IPO in 2011, it raised $352 million; Google, on the other hand, raised $1.7 billion on its IPO in 2004.

And while Google's developers have tried to challenge the intimate social network that Facebook has created through the much hyped Google+, Facebook's fire is yet to wane.

Facebook vs. Google

Despite the constant changes in Facebook's security and privacy settings, as well as the recent applications launched at Facebook's F8 developers' conference, Facebook's numbers still show a following that is growing by the minute. Its value stands strong despite Google's possible acquisition of another fast-rising Internet superstar, Groupon, whose IPO reached $700 when it debuted in November 2011. While this will give Google an extra audience of 33 million consumers who are into the Internet discount category, Groupon and Google's valuations still lag behind that of Facebook.

Competition between Google and Facebook has been tense enough that Facebook CEO Mark Zuckerberg and COO Sheryl Sandberg have been engaged in passive-aggressive verbal jabs with Google's Bradley Horowitz through media interviews.

But while differences in opinion might be a common occurrence in any interview, numbers do not lie. Facebook, once it is made open to the public, will soar higher than ever - but this will come with a price. Facebook will need to fight for control once it steps into a publicly traded platform, and this will not always be beneficial for the company.

Full control

This early, Facebook has already clearly indicated the way it wants to publicly trade. Trade talks with Silicon Valley's premiere bankers about IPO have been initiated by David Ebersman, Facebook's chief financial officer. While Facebook has yet to name investment banks that the company is willing to work with once it enters the trading floor, sources have confirmed that the people behind Facebook intend to retain full control over the company, even going to the lengths of constructing a prospectus internally.

Typically, a company's prospectus is written and reviewed by lawyers and bankers from an externally hired corporate law firm. This insistence on writing the company's own business overview shows that Facebook fully intends to keep its control even when the SEC requires them to make their financial information available to the public on April 2012.

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